This article first appeared in The Edge Financial Daily, on November 26, 2015.

Econpile Holdings Bhd
(Nov 25, RM1.09)
Maintain buy call with an unchanged fair value (FV) of RM1.50: We maintain “buy” on Econpile Holdings with an unchanged FV of RM1.50 per share — pegged at 14 times for forecasted financial year ending June 30 (FY16F) price-earnings ratio.

Econpile announced that it has secured a RM95.5 million contract for piling and related works for Arte Mont Kiara. The contract was awarded by Nusmetro Property Sdn Bhd to Econpile’s wholly-owned subsidiary, Econpile (M) Bhd. 

The contract involves earthworks, piling, and basement construction work for a mixed development project in Mont Kiara. The duration of the contract is from December 2015 to June 2017. As such, the contract will contribute to the group’s earnings in FY16F and FY17F. 

The contract is part of the Arte Mont Kiara development, which will consist of three towers of office suites and serviced residences. Econpile is currently completing works at Arte in Jalan Ampang, also being developed by the same client. 

This is the second major contract announced by Econpile for FY16F, and comes after only three weeks from the previous win. Econpile announced on Nov 9 that it had secured a RM120.5 million piling job for a project in Jalan Semarak. 

As such, Econpile has secured RM216 million worth of new jobs for FY16F thus far. This is positive and makes up 68% of our new order book replenishment of RM320 million for the year (FY15: RM490 million). With the latest win, Econpile’s outstanding order book is currently at about RM630 million (end-June: RM512 million). 

The latest win affirms our view that demand for piling jobs remains resilient given the upcoming property developments as well as major infrastructure works under the 11th Malaysia Plan. Tender book is healthy at about RM1 billion. 

Econpile’s first quarter FY16F (1QFY16F) results are slated for release tomorrow. We expect margins to be sustained at the current levels (4QFY15 net margin: 13.5%), or even surprise on the upside due to better efficiency and lower raw material prices. Recall that margins had improved from 5% to 11% from FY11 to FY15. 

We like Econpile for its strong track record as a leading piling specialist, continued improvement in margins, and sustainable contract flows on healthy demand. — AmResearch, Nov 25